Ilan Kolet: Building in Diversification & Resilience

1

00:00:04,404 --> 00:00:07,807

Hi and welcome. I'm Institutional Portfolio Manager, Ilan Kolet.

2

00:00:09,075 --> 00:00:12,746

Equity markets are feeling optimistic as we head into the final months of the

3

00:00:12,746 --> 00:00:16,683

year, driven by the excitement around AI.

4

00:00:16,683 --> 00:00:20,653

This has created a very crowded trade with a handful of US stocks driving

5

00:00:20,653 --> 00:00:21,988

most of the market's gains.

6

00:00:22,989 --> 00:00:27,660

Our latest paper, which we've just released called Escaping the Crowds,

7

00:00:27,660 --> 00:00:32,132

examines why now more than ever true diversification means

8

00:00:32,132 --> 00:00:33,133

looking beyond the hype.

9

00:00:34,701 --> 00:00:38,638

While we respect the power of AI, the market's intense focus

10

00:00:38,638 --> 00:00:42,809

on it is obscuring some real risks in the US economy.

11

00:00:42,809 --> 00:00:46,646

First, a concentrated market is not a diversified market.

12

00:00:46,646 --> 00:00:50,884

And for the funds we manage, diversification is our guiding principle.

13

00:00:50,884 --> 00:00:55,021

Second, we see growing concerns around US policy,

14

00:00:55,021 --> 00:00:59,292

the potential for resurgent inflation and a weakening US dollar.

15

00:00:59,292 --> 00:01:02,996

Because of this, we're maintaining our underway to US equities.

16

00:01:02,996 --> 00:01:07,100

We're using active managers to find opportunities beyond the mega caps,

17

00:01:07,100 --> 00:01:11,071

and we've taken steps to reduce our exposure to the US dollar,

18

00:01:11,071 --> 00:01:14,707

diversifying into other currencies and gold.

19

00:01:14,707 --> 00:01:17,143

So where are we finding opportunity?

20

00:01:17,143 --> 00:01:21,214

We believe the road less travelled could lead right back here to Canada.

21

00:01:21,214 --> 00:01:24,717

Now we know the recent headlines about the Canadian economy haven't been

22

00:01:24,717 --> 00:01:28,822

entirely positive. We've seen a weak GDP report, trade hit wins

23

00:01:28,822 --> 00:01:31,257

and challenges for consumers.

24

00:01:31,257 --> 00:01:35,395

But we believe the worst of this news is already priced in and

25

00:01:35,395 --> 00:01:37,997

that the situation is beginning to turn.

26

00:01:37,997 --> 00:01:41,301

It just may be darkest before the dawn.

27

00:01:41,301 --> 00:01:45,672

Those major headwinds, from trade tensions to the peak of mortgage renewals are

28

00:01:45,672 --> 00:01:47,373

showing signs of lifting.

29

00:01:47,373 --> 00:01:51,077

At the same time, we see a visible path to improvement with new government

30

00:01:51,077 --> 00:01:55,448

plans focused on infrastructure and reducing barriers to growth.

31

00:01:55,448 --> 00:01:59,319

As investors, we always wanna look to where the puck is going, not where it is

32

00:01:59,319 --> 00:02:03,356

now. That's why we've recently increased our allocation to Canada,

33

00:02:03,389 --> 00:02:06,059

moving from an underweight to a broadly neutral position.

34

00:02:07,093 --> 00:02:11,164

In today's market, it's easy to get swept up by the crowd.

35

00:02:11,164 --> 00:02:15,502

Our job is to protect and manage your capital by maintaining discipline.

36

00:02:15,502 --> 00:02:19,672

That means balancing the exciting but crowded themes like AI with

37

00:02:19,672 --> 00:02:22,308

the underappreciated opportunities.

38

00:02:22,308 --> 00:02:26,479

Thank you for watching. I encourage you to read the full quarterly GAA report

39

00:02:26,479 --> 00:02:27,780

on fidelity.ca.